Form 1099-K Reporting Essentials for Tax Pros

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The American Rescue Plan’s provisions run the gamut of effective dates. The revisions expanding the reporting under Form 1099-K begin in 2022 and focus on third-party settlement organizations, so tax professionals and administrators have some time to “gear up.”

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The American Rescue Plan basically expands Form 1099-K reporting threshold for third-party settlement organizations to focus on $600 in value of transactions annually without regard to the number of transactions.

The old rule, which still the rule in 2020 and 2021, focuses on a $20,000 minimum with an added limitation of finding 200 transactions per payee (Sec.  6050W(e’)). The existing rules regarding payment card transactions – debit, credit or stored-value cards – did not change.

For perspective, we note an IRS site of existing law briefly summarizing the scope of 1099-K. This IRS.gov site, “Understanding Your 1099-K,” summarizes by saying the provisions reach payments from:

• “…. payment card transactions (e.g., debit, credit or stored-value cards), and/or
• in settlement of third-party payment network transactions above the minimum reporting thresholds of gross payments that exceed $20,000 and more than 200 such transactions.”

The site also discusses such practical topics as steps to consider when you receive the statement in error. It also explains, “The minimum reporting thresholds of greater than $20,000 and more than 200 transactions apply only to payments settled through a third-party network; there is no threshold for payment card transactions.”